Gholz: Linking Post-Grant Review with Interference Procedure

Guest Post by Charles ("Chico") Gholz. Gholz is the head of the Interference Section at Oblon Spivak, a former chair of the Interference Committee of the AIPLA, and a frequent author on interference law and practice. I asked him to provide some thoughts on the proposed post-grant review proposals in the Patent Reform Act of 2009, telling him that I was especially interested in whether we should try to use the interference procedural structure for the new post-grant challenges.

It is my understanding that "the PTO" (actually, the PTO officials directly involved in administering interference matters—by which I mean Chief Administrative Patent Judge Fleming, Vice-Chief Administrative Patent Judge Moore, and Senior Administrative Patent Judge McKelvey) have expected the cancellation proceedings to be a species of the genus contested case and that, accordingly, they would be governed by Part 41, "Practice Before the Board of Patent Appeals and Interferences," Subpart D, "Contested Cases," of 37 CFR. To those of us in the interference bar, that makes perfect sense, since the cancellation proceedings will be very, very similar to the first phase (formerly known as the "preliminary motions phase") of patent interferences—except that only one party will be filing substantive motions.

However, proposed 35 USC 326 in both bills provides that "The Director shall prescribe regulations…" governing the post-grant review proceedings (what I'm referring to herein as "cancellation proceedings"). Apparently the drafters of the bills (who I suspect are not members of the patent bar, let alone members of the interference bar!) either were unaware of 37 CFR 41 Subpart D or felt that either additional or different rules would be required for the cancellation proceedings.

Whether the cancellation proceedings are to be governed by Subpart D or by a different set of rules is not an insignificant point. Proposed 35 USC 326(a)(3) in both bills would require the Director to prescribe regulations "setting forth procedures for discovery of relevant evidence, including that such discovery shall be limited to evidence directly related to factual assertions advanced by either party in the proceedings, and [that] the procedures for obtaining such evidence shall be consistent with the purpose and nature of the proceeding." However, while that language could be read as mandating real discovery (i.e., discovery similar to the discovery available in district courts), the bills then go on to mandate that, "In carrying out paragraph (3) [i.e., in providing the rules for discovery], the Director shall bear in mind that discovery must be in the interests of justice," which might be read a giving the PTO room to provide for only the extremely limited kind of discovery that is currently available in interferences. See Gholz, Patent Interferences – Big Ticket Litigation With No Effective Discovery, 4 Intellectual Property Today No. 9 at page 10 (1997).

Similarly, proposed 35 USC 326(b) in both bills would provide that "Regulations under subsection (a)(1) [including the regulations governing discovery]…shall provide for discovery upon order of the Director [actually, it would presumably be upon order of the APJ handling the proceedings]," indicating that, in contrast to district court procedure, the burden of showing entitlement to discovery would be on the party seeking discovery, rather than imposing on that party's adversary the burden of showing why discovery should not be obtained.

Proposed 35 USC 326(b) in both bills would also require the Director to issue regulations providing "for filing under seal exempt from publication requirements" and providing for "protective orders governing the exchange and submission of confidential information"—both of which would be sharp departures from current interference practice. See Gholz, Compelled Testimony, Testimony Abroad, and Protective Orders in Interference Proceedings Under the New Rules, 67 JPTOS 239 (1985). However, 35 USC 326(b) then goes on to say that the Director's regulations "shall ensure that any information submitted by the patent owner in support of any amendment entered under section 329 is made available to the public as part of the prosecution history of the patent." Since the "confidential information" is more likely to be submitted by the patent owner than by its adversary, I wonder how often a protective order will actually issue. Or is the point that the protective order will automatically expire upon conclusion of the cancellation proceeding?

Both the House version and the Senate version of proposed 35 USC 334 govern the effect on cancellation proceedings of decisions in other proceedings (only an infringement action in the Senate version, but either an infringement action or an ITC action in the House version). Surprisingly, both versions seem to assume that the decisions of the courts (or the courts and the ITC), on the one hand, and the decisions of the Board, on the other hand, are of identical issues—despite that fact that the party attacking a patent has a lower burden of proof before the Board and therefore might win before the Board even though it would lose before a court or the ITC on identical evidence.

In sum, I'd like to express my hope that the drafters of the two bills will consult with experts on interference law and practice, both in the PTO and in the private bar, before passing either version of the bill.

Good observations from Mr Morgan, who flags up a key difference: opposition at the EPO is the Last Chance to knock the patent out in one fell swoop in 39 country Europe (570 million citizens). Surely better than trudging round up to 39 countries (with 39 different legal systems and almost as many languages) knocking the patent out, country by country. See the IPKat today, and http://www.epoline.org, for the extinction, by about 16 oponents, of a divisional on the alendronate(?) patent.

Thanks for pointing out some of the interference-like cost and complexity reasons why any proposed U.S. opposition system will not be at all comparable in usage to the usage of the EPO opposition system. Some of the USPTO management does not seem to understand that. There are additional reasons. For example, an EPO opposition is effective against all of the national patents that will issue from the EPO application, and the alternative of waiting to file national country cancellation proceedings against one or more national patents has several disadvantages.
In further contrast, in the U.S. claim validity can be challenged later in reexaminations or as an defense in infringement litigation.
Furthermore, as Max points out, filing oppositions risks strengthening and/or amending claims, especially with the relative ease of submitting alternative claims in EPO oppositions.
Another commentator correctly notes that many EPO oppositions seem to be cranked out routinely by certain companies with personell devoted to that work [or with nothing better to do?] absent any product infringement threat. E.g., once one particlar European company eliminated their opposition department in in a cost-savings move, the number of EPO oppositions filed against my company dropped to almost zero.

To Just Sayin: Don’t understand your use of “should”. Are you telling me that you know already that the EPO opposition system malfunctions yet asking me to confirm what you know already? Here’s a question for you. When a patent owner comes out of an EPO opposition with a decision that maintains the patent in amended form, what does that do to the European presumption of validity? If I foresee the patent owner getting to that end point, do you think my advice to my client is to oppose anyway? And when I’m representing the patent owner, getting opposed is great news. I tell my client, now at last I can build for you a patent that will command a full measure of respect. Do you not realise that patent owners can enjoin infringers, as from the date of issue, 9 months before the expiry of the period for filing opposition, and all the way through the opposition period, even while opposition proceedings are running. There are some reasons why the % of patents issued by the EPO is going down. I don’t know how opposition would pan out in the USA, and you’re only guessing how it has worked for 30 years in Europe. Can we agree on that, perhaps?

Under the present system, a cancellation proceeding is a serious situation, which is as it should be. Post grant opposition in the U.S. would simply further undermine the public’s confidence in the patent system. Why not let those large entities get involved early on through ex or inter partes re-exam, or other third party art submission mechanisms, or under more extreme conditions cancellation proceedings neither of which disturb and in fact enhance the presumption of validity.

A routine post-grant opposition regime invites slack examination, undermines the presumption and a creates a stifling spirit since inventors won’t know whether to go forward until well after the patent issues when manufacturing should already be moving ahead at full force.

Post-grant opposition is a giant step backward and a veiled backdoor attempt at harmonization and deconstruction of the patent system. First instance examination should be improved to restore faith in the presumption of validity. Let challengers make their case during prosecution or forever hold their piece (of prior art) at least until litigation if necessary.

Max you should also be able to confirm that the post grant opposition procedure is susceptible of abuse and is regularly used in Europe by large entities to oppose nearly every patent that issues in a particular area or to particular patentees or both. I don’t think we want this in the U.S.

Another good topic, Dennis. I was indeed wondering how to square discovery with post-issue opposition. Opposition works in the EPO, as full-blown inter partes disputed proceedings, but only because the civil law EPO doesn’t “do” discovery, in any shape or form, whatsoever. Perhaps the US Statute is after all better left alone, and instead the various competent US courts exhorted, even more vehemently, to get their compendium of acts more together.

Drafters “…either were unaware of 37 CFR 41 Subpart D or felt that either additional or different rules would be required for the cancellation proceedings”

I’m guessing “were unaware,” since, contrary to most of the “reform” squawking we hear, the patent system is not as broken as some would like everyone to think it is and already contains many curative provisions. Another example would be the existing provisions for third parties to submit art that existed long before and obviate the need for a separate “peer to patent” type program.